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"Rock Band" Leads Us Into a Brave New World

The cable station may not play music videos anymore, but the kids still want their MTV. The Viacom (NYSE: VIA) subsidiary is putting millions of digital tracks into the hands of young consumers again, thanks to a video game it co-developed with corporate cousin, Harmonix Music Systems.

I'm talking about Rock Band, of course, which is produced by the Viacom twosome and published by inveterate game giant Electronic Arts (Nasdaq: ERTS) . The game has been available for a scant eight weeks, and then only in North America -- but has already racked up 2.5 million paid downloads of additional songs/game levels.

In a delicious little morsel of irony, considering the band's well-documented stance on digital media, the $5.49 three-pack of Metallica songs is the biggest seller to date. Since jumping aboard Apple's (Nasdaq: AAPL) iTunes store in the summer of 2006, the rockers appear to have softened their resistance to the digital age of music. Now, Metallica is a legit, proven superstar in the online universe, topping download charts everywhere you look -- legal or illicit. Some people will go to tremendous effort to get something for free, and there's really no stopping them. But when you sell the good stuff in a proper marketplace, even hard-headed rockers can get rich.

Rock Band and Activision's (Nasdaq: ATVI) Guitar Hero series put an interactive spin on music that makes old stadium anthems like "Juke Box Hero" and "Don't Fear the Reaper" fresh again. (Feel free to add your own cowbell track.) As music becomes ever more ubiquitous, the game component to these tracks appears to be the touch of spice needed to set the content apart from a peer-to-peer download, watching the video for free on Google's (Nasdaq: GOOG) YouTube, or just turning on the radio and hoping for the best.

The artists still get paid. They are free to negotiate terms with Activision or Viacom, as they would with a traditional record label. Nirvana and The Who have sold the rights to entire albums for inclusion in Rock Band, and I will be very interested in the sales figures for those items.

Nevermind went platinum -- meaning more than 1 million radio-friendly units shifted -- two months after the album release, and went on to sell more than 10 million copies. Rock Band recently topped 1 million units, which makes the download figures even more impressive. The installed base of CD players is several orders of magnitude larger.

It's possible that interactive music games are a fad, soon to be forgotten by all but a handful of hardcore fans. But chances are good that we're witnessing the birth of a long-lasting trend that will bloom into a commercial market of its own -- a legitimate music distribution channel that could take its place alongside iTunes, Best Buy (NYSE: BBY) , and concert venues for new and old bands that want to reach a larger audience.

I've said it before, and I'll say it again: We're at the cusp of a new era in the music industry, and the companies that make their money there today might not survive the shift. Again, Activision might take the place of Sony (NYSE: SNE) BMG, although the electronics giant might keep a small finger in the pie through PlayStation 3 sales. These are unpleasant facts; I know it. But then, many historical facts are unpleasant.

It's up to the forward-looking companies and bands to push against what's traditional and figure out what works for the untraditional. It won't be a profitless free-for-all, and there might be a time of complete anarchy as the new market sorts itself out.

But in the end, consumers will be better off because they'll have brilliant services at their fingertips that organize and sell the music they want, in a convenient format, for a reasonable price -- and artists will be better off because the middleman will keep less of the proceeds.

Activision, Best Buy, and Electronic Arts are three of our Motley Fool Stock Advisor recommendations, and Best Buy is an Inside Value pick. Our analysts have a solid finger on the digital pulse -- grab a free, 30-day trial of any of our newsletter services and see for yourself.

Fool contributor Anders Bylund is a Google shareholder but holds no other position in any companies discussed here. He'd like to thank Electronic Arts for the Madden 2003 soundtrack, which introduced him to three of his favorite bands. You can check out Anders' holdings if you like, and Foolish disclosure will rock the next generation as hard as the last one.

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